Albania’s Banking Fees Highest In Region, Competition Authority Reveals
The Authority has recommended the establishment of an Ombudsman to protect consumers from banking sector abuses
Tirana Times
TIRANA, Feb. 21 – Commercial banks operating in Albania are not transparent with their customers and charge higher fees even compared to regional branches in the Balkans, creating barriers in the use of banking services in Albania, the Competition Authority has found after monitoring the market for more than one year.
The study covering the end of 2009 and 2010 showed banks often charge fees in euro and not in the national currency, lek, for some services such as current accounts or cheques putting consumers at risk of facing negative currency exchange rate effects. The monitoring also revealed second-tier banks in Albania, which are overwhelmingly foreign-owned, apply different fees for the same services and do not notify their customers when commissions increase, violating the regulation on the transparency of banking products and services.
Lack of transparency is also observed in lack of flexibility of demand in banking services which makes analysis of effective competition among market operators difficult. Another problem observed by the competition watchdog is that not all 16 banks operating in Albania have websites, failing to provide information in the Albanian language.
“Comparison with service tariffs in regional banks, within the same banking group confirmed that banks operating in Albania apply higher banking service tariffs (such as commissions charged for closing current accounts, maintaining accounts, and plastic cards) compared to their counterparts in the region, making the customer access to these services and the possibility to change the bank more difficult,” says the Competition Authority.
Considering the current situation, the Authority has recommended the central bank to strengthen the implementation of the legal framework in cases when commercial banks unilaterally increase their fees without informing customers, and take measures to increase the banks’ transparency by obliging them to update working conditions information on their websites.
The Authority has also recommended that the Consumer Protection Commission at the Economy Ministry should push for a legal initiative to establish an Ombudsman to protect consumers from banking sector abuses. “The Ombudsman on bank customers should be established as a public authority to examine customers’ complaints about different products offered by second-tier banks.”
The Competition Authority said it monitored the banking systems after public complaints by the business community and individual customers on rising bank commissions and lack of transparency, considered as a key factor for free and efficient competition.
Latest Bank of Albania data show debit/credit payments in points of sale account for only a minority of 7 percent of total cash-dominated payments.
Few weeks ago, Prime Minister Sali Berisha has said his government would move this year to raise taxes for banks charging unjustifiable high fees and tariffs on Albanian consumers. “We cannot accept that electronic transactions which are free of charge all over Europe, have a high price here. This happens at a time when for the sake of developing this market we almost force the citizens to use electronic transactions,” said Berisha, adding that the duty of the government was to move using the system that makes possible a more honest distribution of income. “This government will adopt a policy of zero tolerance towards oligarchs and oligarchy,” warned the PM.
Last year, the central bank called on second-tier banks to increase their transparency to customers, informing them on the cost of services they offer because of numerous complaints of high fees. Governor Ardian Fullani said he was unsatisfied with the effects some regulations issued by the central bank have produced and that the banks’ method of calculating services remained unclear.
“The Bank of Albania often receives complaints by citizens, regular or random users of banking services, regarding the costs banks apply on these services. It proves that citizens often find themselves in front of an accomplished fact regarding bank fees for services they benefit, without prior real information on the reason and amount of these payments. In other cases, the user of the service does not find the necessary and convincing explanation by the bank on the reason of the fee and the way of its calculation,” said Fullani last year.
The central bank said it was also worried over the banking commissions and transactions. An earlier study carried out by the Bank of Albania on the rate of commissions showed that surveyed banks did not carry out documented analysis on the cost of service for their customers or use methodologies to determine respective commissions.
“In the meantime, there is no standard of the form, content and naming of commissions for the same services by different banks, making the inter-banking comparison by service researchers really difficult and increasing public confusion,” said Fullani.
Transactions among customers of different banks also face relatively high commissions, preventing payments through banks and creating undesired consequences for the cash performance in the economy.
The central bank says commercial banks impose commissions based on their competitors and not based on active policies supporting the increase of customers.
“It is not a coincidence that revenues from banking commissions make up only 5.5 percent of the banks’ total revenues,” said Fullani, calling on bank directors to make an improvement in this direction.
Banks oppose watchdog findings
Albania’s Association of Banks has rejected government accusations that banking fees are too high, saying a study it had commissioned showed fees were on a par or cheaper than those in the rest of the region.
The Association of Banks (AAB) said its study of nine countries נAlbania, Bulgaria, Croatia, Cyprus, Greece, Kosovo, Macedonia, Serbia and Turkey נcompared fees and commissions of 20 typical retail banking products, related to accounts, e-banking, cards, and payments.
“It shows that of the 20 items compared, Albania is either on a par or cheaper than the countries in the region in 17 products, while slightly more expensive in three products, on average,” AAB said in a statement.
“Having said that, even for these three products, there are banks in Albania that charge lower than the regional average or charge nothing at all, meaning the Albanian clients have a choice.”
The study showed that Albanian banks’ income from fees and commission covered only 21 percent of their operating expenses, by far the lowest level in the region where the average is 37 percent, AAB said.
“This indicates Albanian banks have higher operating expenses (possibly due to infrastructure under development, cash economy, small population, etc) and yet they do not charge high enough (fees) to cover such expenses,” AAB said.
